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1-800-FLOWERS, Crocs, Microsoft, Avid and American Software as Zacks Bull and Bear of the Day

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Zacks Equity Research
·11 min read
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For Immediate Release

Chicago, IL – April 1, 2020 – Zacks Equity Research highlights 1-800-FLOWERS FLWS as the Bull of the Day and Crocs CROX as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Microsoft MSFT, Avid Technology AVID and American Software AMSWA.

Here is a synopsis of all five stocks:

Bull of the Day:                                              

1-800-FLOWERS is an online retailer known for floral arrangements and other special gift deliveries. The company has expanded its product selection over the years to include gourmet foods and home and garden merchandise, which has helped FLWS grow its customer base.

Q2 Earnings Beat & Raised Guidance

FLWS reported earnings of $1.12 per share, beating the Zacks Consensus Estimate of $1.09 a share.

Total revenues grew 6% year-over-year to $606 million thanks to strong performance in all three of its business segments: Gourmet Foods and Gift Baskets was up 5.6%, Consumer Floral up 7%, and BloomNet up 9.8%.

CEO Chris McCann said that Gourmet Foods and Gift Baskets’ Q2 performance represented over three-quarters of total consolidated revenues for the period. Sales were primarily driven by the company’s Harry & David brand and strong wholesale gift basket business.

FLWS raised its guidance for full year EPS and EBITDA as well.

It now expects earnings to grow 15-17% compared to the previous range of 8-10% growth. EBITDA is now set to increase 13-15% compared to 8-10%. FLWS also increased its 2020 free cash flow outlook to a range of $45 to $50 million.

Market Share Expansion

Shares of FLWS have only lost about 8.3% in value in the past three months compared to the S&P 500’s drop of 18.5%. Earnings estimates have been rising, and 1-800-FLOWERS is a Zacks Rank #1 (Strong Buy) right now.

For the current fiscal year, one analyst has revised their bottom line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up a penny to $0.60 per share; earnings could grow 15.4% compared to the prior year period. 2021 looks pretty strong as well, with earnings expected to continue double-digit year-over-year growth.

Management is confident that 1-800-FLOWERS is well positioned to expand market share in the second half of 2020, as well as to grow sales beyond key holidays like Valentine’s Day and Mother’s Day.

FLWS is also poised to benefit in the current coronavirus economy; the majority of Americans are now practicing social distancing and sheltering in place to help curb the spread of COVID-19. A company like 1-800-FLOWERS can provide an easy way to send friends and families gifts while we’re all stuck at home.

If you’re an investor searching for a niche retail stock to add to your portfolio, make sure to keep FLWS on your shortlist. 

Bear of the Day:

 

Headquartered in Bloomfield, CO, Crocs is known for its broad range of casual footwear for men, women, and kids. All of its shoes feature Croslite material, a proprietary technology that gives each pair of shoes soft, comfortable, lightweight, non-marking and odor-resistant qualities.

CROX plunged 16% after the company reported Q4 and full year 2019 results back in February; investors were reacting to both weak guidance and the broader coronavirus-related panic.

But the company’s fourth quarter was actually better than expected. Revenue of $263 million jumped 21.8% and comparable store sales rose 16% due to the strategic decision to focus on core clog and sandal categories; e-commerce sales were up 34.3% year-over-year.

Earnings of 12 cents a share beat the Zacks Consensus Estimate and improved significantly over Q4 2019.

However, almost a third of Crocs’ total sales come from its Asia-Pacific region, and Q1 revenues will now see a negative impact of $20 million to $30 million; fiscal 2020 revenue will now be $40 to $60 million lower than expected.

Like many other retailers, a number of Crocs stores in China are still closed or operating with reduced hours.

“Despite this difficult situation, we continue to be very optimistic about our long-term growth prospects in China and our Asia region,” said president and CEO Andrew Rees.

CROX is now a Zacks Rank #5 (Strong Sell). Two analysts have cut their full year earnings estimates, and the consensus estimate has fallen 54 cents from $2.10 to $1.56 a share.

Shares of the footwear retailer are down almost 60% year-to-date. The S&P 500 is down about 19% year-to-date in comparison.

Despite the impact the coronavirus pandemic has had on its business, Crocs has been making significant improvements to boost sales and cut costs. Shares are currently trading at just a 10.6X forward multiple, and if management continues to make smart, strategic moves, CROX could be poised for a recovery once concerns about the outbreak begin to wane.

Additional content:

Microsoft Shines Bright in Coronavirus Gloom

To say that many tech companies are poised to gain from the coronavirus is kind of like stating the obvious. To say that software companies will do better than hardware companies is also kind of like stating the obvious. To say that Microsoft will do better than most other tech companies is perhaps the most obvious of all. But that’s what has me writing about why I like Microsoft today.

There’s this thing about software that lets you make the most of whatever hardware you have. So if you’re stuck in a lockdown for example, what you can’t afford to do is buy new hardware. For one thing, the supply chain could be screwed up somewhere, so the parts may not be made in the same quantities as demanded. Second, with only minimal things crossing borders, there’s a chance it won’t reach you, even if it’s being made. Third, you may not feel great rubbing shoulders with folks at the store as you try to figure out the make and model you want.

But then comes software, which tells you, you know what? Just stay put. We have these mechanisms that can let you connect with those you need to, or upload stuff to a common place where others can access it, or collaborate, or click a button to video conference with people. Or if your work is too resource intensive, don’t worry. Just connect to the “cloud,” we have all the resources you might need. And just in case you’re in the mood for a break, we have all the entertainment and games you could possibly need.

What’s more, all the payment will be handled online, so you’re safe. That’s the bottom line, that tech companies can keep you safe until we figure this thing out.

Microsoft is at the center of this race to bring resources to workers stuck at home. And the company has been extremely forthcoming about the strength it’s seeing from the effects of the global lockdown. In a blog post, it said that Italy, which was fairly swamped with coronavirus cases and therefore implemented social distancing and shelter in place orders, saw a 775% increase in Teams' calling and meeting monthly users.

Teams now has 44 million daily users worldwide that generated 900 million meeting and calling minutes on Teams daily in a single week. What’s more, Windows Virtual Desktop usage jumped 3X and public Power BI to share COVID-19 dashboards with citizens surged by 42% in a single week.

There are also a host of other folks using its resources, including emergency services, reporting staff, medical supply systems, response teams for accidents, fires and other issues. The company is engaging with organizations like the UK’s NHS to build a data store that could house all related information at a single, secure location. It has also developed a Healthcare Bot service to create Covid-19 assessment chatbots to screen and advise Americans on matters related to the coronavirus.

The question that many are asking on the street is how much of this is sustainable? Is this just a one-off thing, with everything getting back to normal once the virus scare is no more? Experts’ opinions vary somewhat but the general sense is that while some could return to work as usual, companies that have had a taste of how things could be and having invested in the setup may not back off completely.

In fact, more than anything else, I feel that most companies, whether big or small, are going to be far more open to a work-from-home option than ever before. While it could have an impact on the level of control managers are able to exercise, it does eliminate some of the operating cost, which could be attractive to some.

Microsoft does have a hardware angle to it as well, because of the Windows attach rate, but that dead horse has been flogged enough already. In the new age, the way Microsoft serves across workloads can be termed as nothing but an overwhelming positive.

Last Word

While it’s practically impossible to say what a stock will do exactly, the above reasons seem to indicate that that Microsoft will battle this storm well. But still, if you’re a numbers person, let me remind you that the company has $134 billion of cash and short-term investments on its balance sheet. It generates more than $30 billion in revenues every quarter and is set to grow that number 12.3% in its fiscal 2020 ending June.

Earnings are expected to grow 18.1%. This is particularly amazing when you consider its size and strengths. While estimates have inched down of late, it is hardly something to worry about considering that it has a solid surprise history, averaging 13.0% in the last four quarters. Despite all these positives, the shares are up a mere 1.7% this year.

Recommendations

Software stocks recommended by Zacks include Avid Technology, which carries a Zacks Rank #1 (Strong Buy). You could also dig into Zacks #2 (Buy)-ranked stocks like American Software, or a host of others given here, because, as I was saying, software is a great place to be in at this time.

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Microsoft Corporation (MSFT) : Free Stock Analysis Report
 
Avid Technology, Inc. (AVID) : Free Stock Analysis Report
 
1-800 FLOWERS.COM, Inc. (FLWS) : Free Stock Analysis Report
 
Crocs, Inc. (CROX) : Free Stock Analysis Report
 
American Software, Inc. (AMSWA) : Free Stock Analysis Report
 
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